See You in Court, Montblanc Writes

Aghast that American rival Cross would sell cheaper refills for Montblanc's luxury pens, the German company fires back with a suit

By Burt Helm

A new chapter is about to be written in the storied history of luxury-writing instruments. Montblanc, a German maker of upscale pens whose customers have included such luminaries as Ernest Hemingway, has filed suit against American rival A.T. Cross (ATX ), which started selling ink refills for Montblanc pens, as well as a model that looks very much like Montblanc's flagship Meisterstuck model.

Montblanc fears Cross will cheapen its image: The refills it markets for its own pens normally sell for $6 apiece, vs. Cross's Penatia brand refills, which sell for $4.08 for two at Staples (SPLS ). But it's not just about the money. The way Montblanc North America CEO Jan Patrick Schmitz describes it, the ink refill is practically the soul of a good pen. "With a ballpoint, the ultimate writing experience comes from the refill," Schmitz says. "It comes with the feel, the touch of the pen on the page -- does [the ink] begin right away? Is there a straight line? Does it break off between certain letters?"

They aren't such far-fetched concerns. Tim Lawson, director of marketing and sales at Fisher, another high-end pen maker, describes the delicate balance a refill must achieve: "The ink has to be thin [to flow easily], but then you don't want it to smear. [And] if the ballpoint isn't machined to really precise will be scratchy and rough."


  It's also one reason the industry was shocked that A.T. Cross, the 157-year-old Rhode Island-based pen maker, would sell Chinese-manufactured generic versions of Montblanc refills under its low-end Penatia brand. Hamburg-based Montblanc International tried to head off a confrontation by writing Cross CEO David G. Whalen and asking him to stop. When that strategy didn't yield results, Montblanc's counsel sent an official cease-and-desist letter on Nov. 10, 2003.

It's not illegal to manufacture refills that fit other companies' pens, but Montblanc alleges that Cross's packaging is purposefully misleading and infringes on Montblanc trademarks. Montblanc's filing contends that the white-blister package is marked with "gratuitous use of the word 'Mont Blanc' three times in prominent, bold lettering" accompanied only by "the relatively small and obscure use of the Penatia brand" at the bottom of the package.

The labeling could easily confuse a consumer into thinking the refills originated with Montblanc, the complaint contends. On the package, the bold-faced characters that spell "Montblanc" are roughly 1/32 of an inch taller than the type in which "Penatia" is printed. Montblanc's own packaging is mostly black with the company's trademark white-star inset in the background, whereas the Penatia package is white. On the back of the Penatia refill package is a message that "Penatia refills are not manufactured, licensed, or endorsed by the pen manufacturers referred to on this card."


  Directly above that statement is something potentially far more incendiary, however: "Penatia products are precision-engineered to meet the original manufacturer's high quality standards." An impossibility, says Montblanc's Schmitz. "We have developed these quality standards for the last 98 years. How could they?" After sending the refills to an independent lab for testing, Montblanc found the Penatia refills lacking.

Cross responded to the cease-and-desist letter in November, 2003, saying that it would agree to change the packaging. As recently as a few days ago, however, a BW Online reporter was able to buy Penatia refills in the "accused packaging" at both Staples and Office Depot (ODP ). The failure to stop such sales is why Montblanc has filed a lawsuit, Schmitz says.

Cross executives declined to comment in person, instead sending BusinessWeek Online a statement saying: "We take the intellectual-property rights of others seriously and would never take any action to interfere with those rights.... Over the years, we have developed a good relationship with Montblanc, and we wish to continue that relationship well into the future. However, we will continue to defend our right to sell products that do not interfere with the intellectual property of others."


  Cross says it put the refills on hold indefinitely last week, after Montblanc publicized the suit. A Staples representative says the retailer also recently decided to stop ordering the refills.

For Cross, which has seen revenues decline steadily since 1989, the suit may be a sign of troubles. Montblanc cut into Cross's sales in the 1980s, when its wide-bodied style and high price made it a status symbol. Cross $50 to $100 flagship models suddenly became midmarket, after Montblanc priced its pens in excess of $200. Cross also decided to stick with its thin-body, rolled-gold pens, rather than try to mimic Montblanc's increasingly fashionable thick, darker designs, which are made of what Montblanc calls "precious resin."

What is "precious resin?" Says Monblanc's Schmitz: "It's a trade secret. Even I don't know the recipe." But some pen aficionados note that "precious resin" looks an awful lot like shiny plastic.

After an ill-fated attempt to market a computer-compatible digital pen-and-notepad in the late 1990s, Cross acquired Costa Del Mar, a sunglasses company, and started its Penatia brand in an effort to snag the lower-cost market. Though Costa Del Mar posted increased revenues last quarter, Cross's second-quarter revenues fell yet again, to $29.1 million.


  Cross isn't alone in manufacturing lower-cost refills for Montblanc. Office Depot, which puts out its own brand, uses the same Chinese distributor as Cross. The packaging even has the same copy written on it, word-for-word.

Has Montblanc pressed Office Depot to remove its product from shelves? While Office Depot declined to comment, Montblanc says it recently contacted the retailer to work things out but isn't planning a lawsuit. Still, "we are not singling out Cross" says Schmitz, "Penatia is not the first [brand] we have pursued" in the refill matter.

Montblanc isn't the only rival whose pens Penatia makes refills for, either. At Office Depot and Staples, customers can also purchase low-cost refills for Waterman, Paper Mate, Micro, Parker, and Fisher pens (representatives at these companies said they had never heard of Penatia). The Cross subsidiary even makes lower-cost refills for Cross pens. And why not? When it comes to luxury pens, the refill market is clearly where lots of the action is these days.

Helm is a reporter for BusinessWeek Online in New York

Edited by Thane Peterson

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